Cash rate rise means higher savings account rates are on the way
A higher cash rate is bad news for mortgage holders, but good news for savers as rates on savings accounts go up (and some already have).
The RBA has lifted the official cash rate to 0.85%, up from 0.35% in May. This is a significant increase of 50 basis points. Prior to May's rate rise the cash rate was at a historic low of 0.10% for almost 2 years.
This meant mortgage rates were very low, but so were savings rates. A low mortgage rate is excellent for people with a home loan as it means your repayments are lower. But these ultra-low savings rates made it tough for people with money in the bank trying to save for a home deposit.
However, now that the official cash rate is going up, mortgage rates and savings rates are too.
Are banks raising savings rates?
Yes, banks are increasing the interest rates offered on savings accounts and term deposits. However, not all banks are doing this, and the ones that are, aren't always raising it by as much as the cash rate.
Following the previous cash rate rise in May from 0.10% to 0.35%, here are a few banks that did raise their savings rates over the last month:
- Citi Online Saver increased its total savings rate from 1.10% p.a. to 1.35% p.a.
- Volt Save account increased its total savings rate from 0.90% p.a. to 1.15% p.a.
- NAB reward Saver increased its total savings rate from 0.25% p.a. to 0.50% p.a.
- Macquarie Savings Account increased its total savings rate from 1.35% p.a. to 1.50% p.a.
- UBank Save Account increased its total savings rate from 1.20% p.a. to 1.35% p.a.
- Great Southern Bank Home Saver Account increased its total savings rate from 1.05% p.a. to 1.30% p.a.
Some of these banks increased their rate by the full 25 basis points in line with the RBA's increase in May, and some only raised their rate by 10 or 15 basis points.
What should savers do?
Savings account rates have already been going up over the past month. And the good news is, with another rate rise confirmed today (and a big one at 50 basis points!), we can be certain that savings rates will continue to go up again over the next few days and weeks.
If you haven't looked at the rate on your savings account for a while, it's definitely a good time to compare your options. A few of the best savings rates available at the moment include:
- Bank of Queensland Future Saver under 35s with 3.00% p.a.
- Westpac Life under 30s with 2.00% p.a.
- Virgin Money Boost Saver with 1.60% p.a.
With the cost of living rising rapidly, if you're not earning a good return on your money it's going backwards. With rates rising, it's a great time to compare savings accounts and make sure you're getting a good deal.
